German Firms Warn of ‘Aggressive’ Chinese Rivals

German companies have complained about state-owned Chinese rivals landing an increasing number of contracts in eastern Europe and central Asia by means of “price-dumping, aggressive financing and generous risk-guarantees” from Beijing.

In a paper seen by the Financial Times, German industry’s Committee on Eastern European Economic Relations warns that China seems driven by geopolitical rather than economic goals, with potentially dire consequences for the European Union.

The committee, which represents five industry associations and 140 top companies, called on Berlin to lobby Beijing and European countries to ensure China does not help its exporters more than other nations.

The call comes amid tensions between Beijing and the west over exchange rates and perceived impediments to tradeand investment in China – and also reflects fears about Chinese companies’ increasing technological know-how.

A number of leading German industrialists, among them the chief executives of BASF and Siemens , criticised China this summer for its procurement practices and for a forced transfer of know-how in return for market access.

In a speech on Thursday to the committee, Angela Merkel, the German chancellor, did not address these concerns directly but said it was “urgently necessary” for Europe to compete harder with China for raw materials, another bugbear of German industry.

In a list of “Chinese activities”, the paper cites how the state-owned China Overseas Engineering Group won a motorway project in Poland by undercutting the next-cheapest bid by a third.

In Serbia, the paper says, Chinese groups won a bid to build a €170m ($240m) bridge due to a €145m loan at less than half the market rate from the Export-Import Bank of China.

Kazakhstan is said to have switched to refinancing its banks via Chinese counterparts.

“The financing terms for Chinese suppliers often betray a huge degree of state subsidy, say in the form of very low rates for long-term loans from the Exim Bank,” the paper quotes the German banking association as saying.

The committee says there is a “direct correlation” between Chinese banks’ risk assessments of potential foreign projects and “the strategic interests of the political leadership in Beijing”.